Russian Smoking Ban Takes Effect Amid Dispute Over Higher Taxes

A Russian anti-smoking law that came
into force two days ago needs to be supported by a higher tax on
tobacco in order to “radically” reduce smoking, a top government
official said.

The law bans smoking in public areas including workplaces,
stairwells of apartment buildings and near schools and
hospitals. It also sets minimum prices for cigarettes and allows
for higher tobacco taxes.

“The health ministry will be pushing for faster excise-tax
growth,” Deputy Prime Minister Olga Golodets said in an e-mailed answer to questions from Bloomberg. “Our goal is a
radical reduction of smoking. That could be reached by economic
measures.”

Russia is the world’s second-largest market for cigarette
makers after China. Almost 40 percent of Russians are regular
smokers, according to the World Health Organization. About
400,000 Russians, or 0.3 percent of the population, die each
year from smoking-related diseases, Prime Minister Dmitry Medvedev said in October.

The Health Ministry proposed raising the tax to 4,000
rubles ($125) per 1,000 cigarettes by the end of 2015, from 510
rubles, according to a letter dated Sept. 22 from Health
Minister Veronika Skvortsova to Golodets obtained by Bloomberg
News.

The Government approved a Finance Ministry proposal last
week with a tax as high as 1,250 rubles in 2015.

Cigarette prices in Belarus and Kazakhstan are 30 percent
lower than in Russia and illicit imports will cost the Russian
budget 4.6 billion rubles in lost revenue in 2015, according to
Alexander Lioutyi, corporate affairs director at BAT Russia.

‘Key Change’

The ban on public smoking will be extended to restaurants
and hotels and train stations from June 1, 2014, and sales will
be banned in street kiosks small enough for clients to enter.

“It’s too early to evaluate how the law will influence the
market,” Lioutyi said by e-mail. “We will follow every part of
it, although we have our doubts as to the effectiveness of some
of the measures.”

Russia’s police cannot yet issue tickets for violations of
the law now as amendments setting fines for public smoking
aren’t due to be approved by lawmakers until next month, Oleg
Kulikov, a member of the Communist Party and deputy head of
parliament’s health committee, said by phone from Moscow today.

The Health Ministry says smoking levels may be cut in half
as a result of the anti-tobacco law and tax increases for
cigarettes in Russia, where a pack of Marlboros sells for about
$2.